Decoding the Appraisal Process
Getting a home can be the biggest transaction some people will ever encounter. Whether it's a primary residence, a seasonal vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties taking part in the transaction. The most known face in the transaction is the real estate agent. Then, the lender provides the money required to fund the deal. And ensuring all details of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.
So, what party is responsible for making sure the value of the property is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Blue Ridge Appraisal Co., L.L.C. will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our responsibility to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser pulls information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property comparable to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the communities in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Blue Ridge Appraisal Co., L.L.C., we are experts when it comes to knowing the worth of real estate features in Staunton and Staunton City County neighborhoods. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property yields is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. The bottom line is, an appraiser from Blue Ridge Appraisal Co., L.L.C. will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.
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